Apple vs. Samsung, the pony indicator and an Internet bounce

By Shawn Langlois

Flaccid earnings, foreboding seasonal omens and the Putin powder keg are more than enough to send investors scampering to the sidelines.

But that would mean they’d have to ignore what the ponies are telling us. And everybody knows the ponies are the one true key to unlocking the mysteries of the market.

No, really, the Kentucky Derby runs this Saturday, and there has to be a market indicator in there somewhere, right? If there wasn’t, somebody would have had to invent one by now. Fortunately, we have Jeff Kleintop of LPL Financial, and even more fortunately, there are some bullish tidbits to be gleaned from horseracing.

It’s not as much of a (home) stretch as you might think, either. The gauge has pretty accurately reflected the last three recessions and the rebounds out of them.

“Thoroughbreds are costly and speculative investments. The prices paid reflect the general willingness of horse owners to take risks,” he wrote. “As a result, they are a good indicator of the strength of the economy.”

Of course, Kleintop has the data, via leading horse auctioneer Keeneland, to back it up. The median price for thoroughbreds at the April auction reached a record $200,000, up over 30% from last year. Risk on, or bubble times?

“The animal spirits of business leaders and investors may be re-emerging, resulting in more investment that may herald better growth,” he said.

Specifically, it’s about Internet stocks today, and there’s a tasty short-term bounce that’s bound to happen, at some impossible-to-predict point. EBay and Twitter could certainly provide that catalyst, but it’s hard to take that bet, considering the 21% freefall the Nasdaq Internet Index has been on since its high last month. (Here’s Allianz’s CIO on why Twitter has its work cut out for it)

In the last four trading days alone, the gauge has given up more than 10%. The trend is just nasty, so juggle these knives at your own risk.

“Most of these companies recently reported better-than-expected numbers, and we have still seen wholesale liquidation of them,” a Bespoke blogger said. “They’ve gotten to extreme oversold levels in the near term, and like we saw earlier this month, they can certainly experience short-term bounces within longer-term downtrends.”

The economy:The latest reading on consumer confidence is due at 10 a.m. Eastern, and it’s expected to reflect some growing optimism. In fact, it could hit the highest level since November 2007, otherwise know as the month before the Great Recession started. But an hour before that, the Case-Shiller index on home prices is expected to show housing costs remained elevated in February compared with one year earlier. Read: Spotlight on the economy.

The quote of the day: “She was like a sexy nanny playing ‘pin the fried chicken on the Sambo’.” — Former Lakers great Kareem Abdul-Jabbar, referring to Donald Sterling’s girlfriend in an opinion piece for Time.com.

Samsung Electronics
/quotes/zigman/189457/realtimeKR:005930, the world’s biggest smartphone maker, posted results overnight and said it managed to keep profit steady in its mainstay handset business, as the competition grows fiercer and fiercer. Investors didn’t buy into it, with the stock falling during the Asian session.

The buzz:Warren Buffett is never too far away from the Wall Street spotlight. The recent publicity boost came from a story in The Economist calling for him to break up Berkshire
/quotes/zigman/219651/delayed/quotes/nls/brk.aBRK.A. With the annual meeting coming up next weekend, expect more headlines out of Omaha. For now, let’s take a quick reflection on just how amazing his track record is, even including his recent underperformance. Look at how ridiculous Buffett’s returns have been during down years for the S&P, according to stats compiled by the Wealth of Common Sense blog.

The chart of the day: Erik Swarts of the Market Anthropology blog has been following this chart for a while, and right now, it’s telling to take some of the recent Apple
/quotes/zigman/68270/delayed/quotes/nls/aaplAAPL profits and come back for more in the summer. “Since we began contrasting the historic oil comparative in December of 2012, we have utilized it as a mean-reversion template of comparable market trends. Both were the deepest, most dominant and crowded trades of their day and have expressed very similar reflexes as they boomed from the mean, busted below and now, seen in Apple today – bounced its way back to long-term trend performance,” he wrote.

The call of the day: Apple’s iPhone 6 is coming, and the impact it ends up having on Samsung could be devastating. Or maybe, it won’t matter a lick, and Samsung will continue to churn nice profits from its own phones. The latter is what Sanford Bernstein analyst Mark Newman told CNBC that he sees happening. According to him, the stock should benefit in a big way. As in, 45% upside from these levels.

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Need to Know (NTK) guides investors to the most important, insightful items required to chart a course ahead of each trading day. Anchored by lead writer Shawn Langlois, NTK will sift through the fire hose of news, commentary and data, from traditional and non-traditional sources, and extract what’s most essential. You can start reading NTK here as it begins publishing at approximately 6:30 a.m. ET, or sign up here to get a version in your email box every morning at approximately 8:45. a.m. ET.